Fair Work Agreements

The Coalition Government are pushing ahead with their plans to introduce Fair Work Agreements into New Zealand workplaces, with the announcement that it is their intention to have at least two of these agreements in place during their first political term. So, what is a Fair Work Agreement and how will their existence change the way we set wage rates for Employees in New Zealand?

The Government has indicated that they wish to introduce a system which is not dissimilar to the Australian Modern Award process, despite the majority of Australian businesses stating that they would prefer to have the free and flexible bargaining environment enjoyed by NZ Employers – and Employees for that matter.

The Australian Fair Work Act 2009 introduced the concept of Modern Awards and since then, 122 modern occupational and industry awards have been put in place. Most awards have industry, not occupational coverage, and apply to Employees falling within the specified classification structure.

A traditional Modern Award will stipulate: the minimum wage rate for each classification of Employee (i.e. trade, technical or supervisory roles); any required allowances to be paid to Employees; provisions for casual, full time or part time Employees; details of Hours of Work provisions; and penalty rates for overtime, shift or weekend work.

As a result of the above, the 122 Modern Awards have resulted in the introduction of thousands of minimum wage rates as each award contains different wage rates for different categories of Employees. Currently, approximately 22% of Australian Employees are paid award rates and, less than 1% of Employees are paid at the National Minimum Wage Rate ($18.93 per hour) as the minimum rate on the majority of Modern Awards is greater. Casual Employees get a 25% loading over and above the National Minimum Wage Rate.

The current Australian system is maintained by a third party independent tribunal with award variations being based on submissions and evidence presented (primarily by Unions) rather than economic or political factors. The system is highly complicated, creating high risk and high compliance risks for Employers. Modern Awards are particularly complex and burdensome for small Employers.

Although, initially the rates were set through negotiations between Unions and Employers, the system has progressed to a point where the Fair Work Commission has less respect for the outcome of negotiations and the views of the industrial parties.

Prior to the early 1990’s only two (2) countries in the world had a workplace award system: Australia and New Zealand. Australia was the only country to maintain this when free market bargaining was introduced into New Zealand.

The NZ Government have advised that, in seeking to implement a similar model within their first political term, they will focus specifically on Truck and Bus Drivers (Nationally) as they believe that these two (2) groups of Employees are particularly disadvantaged in current wage negotiation processes.

Why are we wanting to return to a system that no other country wishes to adopt, and Australian businesses would freely abandon if given the opportunity?

If you have any questions in relation to any of the pending Employment Law Reforms, please feel free to contact us.

The Employer File is written by Russell Drake, of Russell Drake Consulting Ltd., Specialist Employment Relations Consultants who act exclusively for Employers – see www.russelldrakeconsulting.co.nz or phone (07) 838 0018.